MSCA Grant
The project
What was the project about?
OECD countries face the aging of their population, a demographic trend that will amplify in the next decades. This causes a substantial increase in the number of the disabled elderly, who require assistance with activities of daily living. Reconciling the societal concern for ensuring appropriate long-term care (LTC) to the disabled elderly and the pressure on public spending is a major challenge that all OECD countries struggle with. Governments aim at containing rising costs of formal LTC by setting eligibility criteria and cost-sharing rules, and encourage the provision of LTC by relatives (informal care). Such measures may however impact the efficiency and equity of LTC policies.
How does the design of LTC policies affect LTC use? What are the downstream effects LTC use may have on health and health care use? To what extent are informal caregivers involved alongside formal caregivers? And how does the aggregate value of informal care compare with that of formal LTC?
This project provides robust empirical evidence on these questions by making use of conceptual and empirical tools from applied economics. Identification of causal relationships is achieved by exploiting exogenous variation (e.g. induced by a reform). Furthermore, the project leverages high-quality, individual-level data, which combine surveys and administrative sources. It relies on data, policies and institutional contexts from France and the Netherlands.
What has been done?
WP1 and WP2 were combined to answer the following questions: is it so that when older adults are required to pay more for a stay in a nursing home, their admission to a nursing home is postponed? If so, do they use more home care as a substitute? And has this any adverse health consequences? Together with Pieter Bakx and Bram Wouterse (Erasmus University Rotterdam), we leverage a reform of cost sharing on LTC that was implemented in the Netherlands. We find that a higher price for nursing home stays does reduce the time spent in a nursing home. The offsetting increase in home care use is small and there is no overall effect on mortality. Because some people end up staying many years in a nursing home, even a limited increase in the monthly out-of-pocket payment induces a substantial rise in the total amount older adults may face over their retirement. The study is publicly available as a working paper.
It is often claimed that the help provided to older adults by their relatives can delay or altogether avoid their nursing home admission. Is it so? WP8 tackles this question, making use of a unique large health survey linked with administrative data. It was carried out together with Julien Bergeot (Université Paris Dauphine). We find that the chance of a nursing home admission is reduced with informal care for individuals with mild limitations, while it is increased for individuals with severe limitations. For the latter, although informal care increases formal care costs, it also results in lower post-acute care use and mortality. The study is publicly available as a working paper.
Following the outbreak of the COVID pandemic, WP9 was initiated. It stems from the following puzzle: in economics, it is generally assumed that informal care may substitute with home care but vanishes when an older adult enters a nursing home. Yet, the visit restrictions imposed on nursing home residents in the early months of the pandemic seems to have had major effects on the daily life of residents. Together with Quitterie Roquebert (Université de Strasbourg), we show that a majority – over 75% - of residents do receive informal care. Caregivers are mostly involved in helping with administrative tasks and mobility within and outside the residence. The study is publicly available as working paper and published in French and English in a peer-reviewed journal.
WP10 provides an assessment of the aggregate monetary value of the informal care provided to older adults in France. In this study conducted with Quitterie Roquebert (Université de Strasbourg), we additionally answer the following question: Are nursing home residents more likely to receive informal care than older adults in the community because both populations have different characteristics, and/or because the determinants of informal care receipt differ at home versus in nursing homes? We show that both channels are equally relevant empirically. In the aggregate, informal care for people in the community remains quantitatively dominant because nursing home residents represent a limited proportion of all older adults with care needs and they receive less hours of informal care on average. The study is publicly available as a working paper.
Finally, WP11 investigates into options for the financing of long-term care that have been recently developing in the Netherlands. These options aim at encouraging ageing-in-place. Has this goal been achieved? Have these care options played a role in the sustained development of private nursing homes? How can they contribute to or challenge the equity in access to long-term care and in its financing in the Netherlands? Th aim of WP11 is to describe these options and show how they are being used by older adults, based on aggregate statistics as well as individual-level data.
What are the main scientific contributions and policy implications?
The project extends the scientific literature, in the following main ways: it sheds light on the role of out-of-pocket payments and informal care in nursing home entry decisions. Evidence on their role mainly comes from the United States, whose health care system differs radically from those of European countries. Recall bias in the timing of admissions is eliminated thanks to the use of administrative data; those additionally allow to map out the use of substitute home care and potential health effects (WP1/2 and WP8). The project provides a quantitative assessment of informal care receipt by nursing home residents, which had been left aside by the economic literature. Compared with studies from other fields, the project relies on a representative and high-quality survey that minimizes the risk of selection biases (WP9 and WP10). By gathering and making openly accessible dedicated information on co-payments on long-term care in the Netherlands, the project can facilitate further research (WP1/2). The description of novel options for the financing of long-term care (WP11) intended to a non-Dutch audience may foster interest for comparative, international research.
The project delivers a set of policy implications. When designing cost-sharing rules for long-term care systems, policy makers should not only look at budgetary savings but also aim at minimizing welfare losses. A cap on lifetime co-payments would limit the associated financial risk while preserving the incentive to postpone an admission (WP1/2). Flexible options for the financing of long-term care prove necessary to bridge the gap between intensive care provided in nursing homes and less comprehensive and lighter care delivered at home. The options that have been developing along these lines in the Netherlands may however fuel the growth of fully private residential care admissions and may have unwarranted consequences on equity in access to care and in its financing (WP11). Promoting informal care systematically cannot be expected to systematically result in lower institutionalization rate and care costs. Still, informal support can well be welfare-enhancing: a timely admission may come along with benefits in terms of well-being and survival that may outweigh additional costs (WP8). Loss of informal care due to visiting restrictions may negatively affect the wellbeing of nursing home residents and lead to adverse health effects. Policymakers should factor in the role of informal caregivers when assessing the benefits and costs of visiting restrictions in nursing homes (WP9). Ignoring nursing homes leads to underestimate the aggregate value of informal care provided to older adults in France by 5%. When informal care is taken into account, households are found to bear 80% of LTC costs (WP10).